While household incomes barely grew over 2006 and actually fell in the final quarter, many homeowners were also raiding savings accounts to fund high spending, the report claimed.

"There's a danger that we are slithering into complacency," warned Mr Spencer.

Britain's consumer debt is currently estimated to stand at £1.3 trillion.

Nevertheless, the picture was not all bleak, as the ITEM Club forecast that wages and salaries would grow by 5.5 per cent over 2007, boosting the spending power of those in secure employment with real earnings growth of around two per cent.